Do you do Business in FMCG? Then you really need EDI today29. September 2020
Doing business in the FAST MOVING CONSUMER GOODS (FMCG) segment places high demands on purchasing processes, logistics and cash flow. That is why EDI - a standardized system for electronic (and mostly automated) document exchange - has been operating here for decades. This system will save companies a huge amount of manual work and because it is used by most customers and suppliers in FMCG, its implementation brings instant and visible results.
The FMCG and its challenges in the supply chain management:
The fast-moving goods segment is specific in that a huge amount of goods flows through it in a short time span. As a seller:
- you sell thousands of products of various brands and manufacturers
- you get goods from tens to hundreds of suppliers
- you are constantly solving the topicality of product data from the supplier
- you send tens to hundreds of orders every day
- you return some unsold goods to suppliers
- you depreciate some goods due to their limited shelf life
- or you have to react flexibly to discount promotions.
A company that automates at least a part of this agenda will easily save hundreds of thousands of crowns a month on operating costs. That is why EDI in FMCG is a complete standard today - a foundation that facilitates communication with suppliers and brings order to the purchasing process.
How does EDI help a typical FMCG company?
Most companies from the FMCG market exchange three basic documents via EDI - orders, delivery notes and invoices.
In practice, this works by the customer preparing an order in his information system and sending it via EDI. The EDI provider converts the order into an ORDERS message and sends it to the supplier, to whom the order is loaded into the information system and, in addition, receives an e-mail notification.
The customer does not have to print or send the order by e-mail, it saves a few minutes of time on each order and mainly knows that the order has been delivered. The supplier accepts the order with one click without having to manually rewrite the data into his information system.
As soon as the supplier dispatches the order, he notifies the delivery of the goods again via EDI (EDI message DESADV), which allows the customer to prepare in advance and speed up the receipt of goods at the warehouse. Subsequently, the supplier also sends an invoice (INVOIC) via EDI, which is loaded directly into the customer's information system without any manual work. If the prices agree and the performance corresponds to the income, it is automatically matched with the corresponding documents and posted. This saves EDI additional minutes, eliminates routine work and eliminates the risk of error.
Although the introduction of EDI into a business relationship is usually initiated by customers, the electronic and automated flow of documents has great benefits for suppliers. The ordering process is faster, clearer for them and they have the opportunity to finance long-term invoices. Larger suppliers will then appreciate the relief from manual work or the reduction in errors, and often it is even they who persuade their customers to EDI.
What else can EDI offer companies
In addition to the electronic exchange of orders, delivery notes and invoices, some FMCG customers also use:
- Receipt of goods (RECADV), which inform suppliers about the actual receipt of goods. The supplier then invoices only on the basis of this receipt, which eliminates the need for logistical credit notes. Receipt of goods are used, for example, by Ahold or Makro.
- Inventory Survey (INVRPT), which informs suppliers about the current and desired state of stocks in their warehouses and stores. This message can easily prevent a shortage of goods (out-of-stock) before promotion (= discount action). For example, In the Czech Republic, its used by Globus or Tesco.
- Returns (RETANN), which inform the supplier about the return of goods and on the basis of which credit notes are created. Returns speed up communication and enable automatic pairing with credit notes. Used by Ahold or Tesco.
- Payment advice (REMADV), which informs suppliers about the payment made, for example, when paying multiple invoices at once or when resolving decade invoices for entire stores. In the Czech Republic used by COOP Moravia.
EDI can also be used in combination with other systems, for example, the combination of the warehouse system and SSCC codes is strong, which significantly facilitates the storage and receipt of goods by whole pallets. "Thanks to the use of a delivery note (DESADV) with SSCC codes, we have accelerated the receipt of goods several times over. For example, we used to receive a shipment from Nestlé which took us about 3-4 hours, now we can do it in a matter of minutes, ”confirms the acceleration of logistics processes, for example, Le Hai Anh from Tamda Foods company.
It is true that the more the customer solves via EDI, the greater the possibilities for process automation.
EDI also helps with legislation compliance
In addition to speeding up the ordering and receipt or processing of documents, EDI will also help with the fulfillment of certain legislative obligations. Part of the most used Czech EDI system ORiON EDI is, for example, eCatalog, which is an alternative to GDSN and allows the customer to automatically receive product information from suppliers. For example, he quickly writes a mandatory list of allergens to his e-shop, but most importantly he has up-to-date data on all products and knows in advance if, for instance, the packaging changes. Makro, which uses the eCatalog, transfers the responsibility for the correct information on the products to the supplier.
Similarly, EDI can help you comply with Act No. 395/2009 Coll. on significant market power in the sale of agricultural and food products and its abuse, which among other things states, that every order from the retail chain must be confirmed in writing by the supplier. The supplier can confirm the order with an EDI message ORDRSP, this tool in the Czech Republic is used, for example, by Penny Market.
EDI is used by Kaufland, Tesco, Billa, Nestlé or Mondelez
The fact that EDI in the fast-moving goods segment pays off is also evidenced by the large number of companies that use it. Of the largest customers, EDI was implemented, for example in
- Penny market,
- nebo COOP.
An up-to-date overview of EDI-ready chains can be found at: https://www.edizone.cz/elektronicka-vymena-dat/edi-ready-retezce/
On the part of suppliers of fast-moving goods, are these companies that use EDI
- Plzeňský Prazdroj,
- Unilever (Dove, Rexona, Knorr, Rama, Magnum and others)
- Agrofert (Kostelecké uzeniny, Olma, Penam and others),
- Mars (Mars, Snickers, Bounty and others),
- Hamé (Znojmia, Májka a další),
- or Mondelez (Milka, Opavia, Oreo and others).
EDI will be even more important in the future
The fast-moving goods segment is increasingly appearing on the Internet and companies such as Rohlík, Košík or iTesco have been using EDI since the very beginning of their business. Electronic communication with associates is a natural part of operating an online platform.
"Thanks to EDI, we save a lot of time when processing invoices. If the supplier sends us documents via EDI, they are automatically uploaded to our accounting system. If the documents were sent by e-mail or post, we would need two more employees to process them," says Tereza Podhorská, an EDI specialist from Rohlík.cz.
Similarly, EDI is proving important in times of coronavirus pandemic, when employees often work using homeoffice. Thanks to the electronicization of documents, it is not necessary for people to work physically in the company - you can arrange the issuance and approval of orders remotely and if you connect EDI with other smart systems (such as iNVOiCE FLOW), you can also automate the approval and posting of overhead invoices.
If you are considering EDI, contact, for instance, the largest Czech provider GRiT, which offers a flexible ORiON EDI solution. Decades of development are behind the solution and it’s used by a number of leading FMCG players such as Rohlík.cz, COOP Morava or Globus. In addition, you can easily connect it to your ERP system and other GRiT tools - typically the iNVOiCE FLOW invoice processing automation system or the LOKiA WMS warehouse system.